Valuing IBM's Software Franchise
Zero Gravitas • 132 Comments
Zero Gravitas • 132 Comments
IBM's 21st Century Transition Is Failing
Peter E. Greulich • 256 Comments
Peter E. Greulich • 256 Comments
Thu, Mar. 3, 3:42 AM
- IBM has filed a lawsuit against Groupon (NASDAQ:GRPN), alleging that the daily deals website operator builds its business model using patents without authorization.
- "Groupon has refused to engage in any meaningful discussions about reaching a license agreement to end its infringement of IBM's patents," the firm's complaint said.
- Big Blue filed a similar lawsuit against Priceline last year, accusing it of patent infringement in running its travel and dining websites.
Wed, Mar. 2, 6:30 AM| Wed, Mar. 2, 6:30 AM | 3 Comments
- February monthly performance was: +2.15%
- 52-week performance vs. the S&P 500 is: 0%
- $0.05 in dividends were paid in February
- Top 10 Holdings as of 1/29/2016: Coca-Cola Co (KO): 4.25%, Microsoft Corp (MSFT): 3.76%, Altria Group Inc (MO): 3.5%, Apple Inc (AAPL): 3.18%, AbbVie Inc (ABBV): 2.76%, McDonald's Corp (MCD): 2.22%, International Business Machines Corp (IBM): 2.1%, Intel Corp (INTC): 1.85%, Home Depot Inc (HD): 1.83%, 3M Co (MMM): 1.8%
Wed, Mar. 2, 4:58 AM
- IBM plans to sell up to $150M worth of shares in China's Lenovo (OTCPK:LNVGY), according to Reuters, which cited a term sheet of the deal sent to investors.
- IBM will offer 182M shares in an indicative range of HK$6.26-HK$6.42 each, equivalent to a discount of up to 6.4% to Lenovo's closing price on Wednesday.
- Goldman Sachs was hired as sole bookrunner for the deal.
Mon, Feb. 29, 12:27 PM
- Continuing its recent M&A spree, IBM (IBM +0.3%) is acquiring Resilient Systems, a provider of incident-response security software to 100+ Fortune 500 and mid-sized companies. Terms are once more undisclosed.
- Resilient's platform is declared to automate and orchestrate "the many processes needed when dealing with cyber incidents from breaches to lost devices." It features Privacy, Security, and Action modules, and integrates with numerous third-party security apps.
- In tandem with the purchase, IBM is creating a new services business (called X-Force Incident Response Services) that will rely on 3,000 consultants and security researchers to help companies "plan for, manage, and respond to cyberattacks." Resilient's software will help underpin the services, and will also be integrated with Big Blue's QRadar security intelligence platform and other security products.
- FireEye's Mandiant unit is a major player in the incident-response services space. Microsoft and Cisco have also shown an interest in this space.
- Two weeks ago: IBM buying healthcare analytics firm Truven for $2.6B
- Other recent IBM acquisitions
Mon, Feb. 29, 8:18 AM
- Buying IBM could be a mistake, says Warren Buffett (BRK.A, BRK.B), but he hasn't sold a share and continues to expect it to be worth more in the future (though "Charlie's neutral").
- On another troubled holding, American Express (NYSE:AXP), Buffett says it's a business that has always had to adapt, and now is no different. "It's a very strong brand, but you are going to face a lot of competition on payments."
- On yet another roughed-up name, Bank of America (NYSE:BAC), The Oracle says CEO Brian Moynihan has done a great job after inheriting a bad hand.
- Buffett is unlikely to be an owner of Dow Chemical's (NYSE:DOW) common stock, and likes the preferred more. He owns $3B of preferred from 2009 that pay an 8.5% annual dividend. Converting would amount to about 6% of the common float.
- Of troubled names in general, Buffett reminds Berkshire Hathaway's stock price has dipped 50% three different times since he began controlling it. "It was terrific!" A stock going down is a good thing, unless the company itself is losing value.
- Live blog of CNBC interview
Mon, Feb. 22, 2:31 PM
- IBM (IBM +0.2%) and VMware (VMW +1.5%) say they will partner to help companies move more easily into the cloud through a plan to deliver VMW’s software-defined data center architecture on IBM Cloud.
- The move would enable businesses to migrate existing IT workloads via VMW’s virtualization software without the need to modify them, which companies have described as a key barrier to cloud migration.
- The two companies also will collaborate on marketing and selling new offerings for hybrid cloud deployments, including seamless workload migrations, disaster recovery, capacity expansion and data center consolidation.
- IBM Cloud senior VP Robert LeBlanc tells WSJ that ~80% of enterprise clients are looking for this kind of hybrid cloud strategy, saying “We’re moving to the next phase of the cloud. This is going to accelerate that shift.”
Fri, Feb. 19, 11:36 AM
- Digging through this week's 13F filings, Evercore ISI's Pankal Patel and team attempt to separate the holdings of hedge funds and other active managers.
- What they found were that institutions (active managers) were most overweight Wells Fargo (NYSE:WFC), IBM, and Coca-Cola (NYSE:KO). Two new names on the overweight short-list: Level 3 Communications (NYSE:LVLT) and Zimmer Biomet (NYSE:ZBH).
- Hedge funds, on the other hand, were most overweight Time Warner Cable (NYSE:TWC), Priceline (NASDAQ:PCLN), and Netflix (NASDAQ:NFLX). Hedge funds also added to holdings of AIG, Humana (NYSE:HUM), Alphabet (GOOG, GOOGL), and EMC during Q4.
- Also of interest: While consumer discretionary stocks (NYSEARCA:XLY) continue to be the top over-weighted sector for hedge funds, they pulled back from those names considerably during the quarter, and added to tech (NYSEARCA:XLK) in a big way. They also added to their underweight in the consumer staples stocks (NYSEARCA:XLP).
Thu, Feb. 18, 10:27 AM
- Believing IBM's (IBM +5.7%) current valuation doesn't reflect the company's efforts to grow its cloud/analytics exposure, Morgan Stanley's Katy Huberty has upgraded to Overweight and set a $140 target.
- Huberty: "IBM Strategic Imperatives - data, cloud, engagement - now make up 35% of revenue and grew 17% in 2015, or 26% at constant currency, reflecting a faster-than-expected transformation to higher growth / higher value solutions. For comparison, Microsoft Cloud (Azure + Office 365) accounted for 36% of revenue and grew 20% in 2015. Yet IBM's share price reflects a perpetual decline in residual income, and these higher growth categories are undervalued based on our sum-of-the-parts (SOTP) analysis."
- Of note: While IBM's Strategic Imperatives revenue rose 17% in 2015, total revenue fell 9% (1% exc. forex) after adjusting for divestitures. Free cash flow rose by $700M Y/Y to $13.1B, but is forecast to drop to $11B-$12B in 2016.
- Regardless, Huberty expects the perceived disconnect between IBM's growth efforts and valuation to correct itself with the help of disclosures at IBM's Feb. 25 analyst day, stabilizing revenue, and improving free cash flow. She goes as far as to argue IBM "warrants a premium over other hardware companies that haven't invested heavily to transform to new computing paradigms," and predicts the company will deliver 2% annual free cash flow growth over the next two years (better than a consensus of -5%).
- Following Huberty's upgrade and news of the $2.6B Truven Health Analytics deal, IBM is a large-cap standout on a morning markets are nearly flat. Shares are now up 14% from last Thursday's 52-week low of $116.90. They trade for 9.4x a 2017 EPS consensus of $14.16.
Thu, Feb. 18, 9:23 AM
- In a big expansion of the company's healthcare bet, IBM's Watson Health unit is buying Truven Health Analytics, a provider of healthcare data and analytics services for healthcare providers, enterprises, governments, and life sciences firms, for $2.6B from investment firm Veritas Capital. The deal is expected to close later this year.
- The deal comes six months after one to buy top medical imaging software firm Merge Healthcare, and ten months after the purchases of patient data analysis software firm Phytel and clinical database provider Explorys. The Phytel/Explorys deals coincided with the launch of Watson Health, which aims to provide software/services that can deliver insights from large volumes of anonymized patient data.
- Truven has over 8,500 clients, and will boost the size of Watson Health to over 5,000 employees. IBM: "Upon completion of the acquisition, IBM's health cloud will house one of the world's largest and most diverse collections of health-related data, representing an aggregate of approximately 300 million patient lives acquired from three companies. IBM plans to integrate Truven's extensive cloud-based data set spanning hundreds of different types of cost, claims, quality and outcomes information with its existing data sets."
- Big Blue adds data/insights provided by Truven "inform benefit decisions for one in three Americans," and that Truven's "cloud-based technology, methodologies and health claims data" will be integrated with the Watson Health Cloud platform for providing cloud-based healthcare analytics and data sharing.
- Recent IBM acquisitions
Tue, Feb. 2, 10:39 AM
- Five days after announcing it's acquiring Columbus-based online ad agency Resource/Ammirati, IBM (IBM -1.4%) says it's acquiring Aperto, a Berlin-based online ad agency whose client list includes Airbus, Volkswagen, and Siemens. Terms are once more undisclosed.
- Like Resource/Ammirati, Aperto has 300+ employees and will join IBM's Interactive Experience (iX) digital agency unit (has over 10K employees). IBM, which has made a series of software and services-related acquisition to help benefit from rising online ad spend and a shift in IT spending towards CMOs: "Demand for [ad] experience design is expected to accelerate as clients in all industries seek to deliver more consumer-like experiences to their customers and employees, and integrate the power of cognitive computing and analytics platforms."
- The moves follow a Q4 in which Big Blue's Global Tech Services and Global Business Services revenue respectively fell 7.1% and 9.9% Y/Y to $8.1B and $4.3B. Both forex and the impact of cloud services adoption on on-premise IT services spend weighed.
- 14 months ago: IBM expands alliance with ad giant WPP
- Recent IBM acquisitions
Tue, Feb. 2, 9:00 AM| Tue, Feb. 2, 9:00 AM | 1 Comment
- January monthly performance was: -4.6%
- 52-week performance vs. the S&P 500 is: -1%
- $0.02 in dividends were paid in January
- Top 10 Holdings as of 12/31/2015: Coca-Cola Co (KO): 4.05%, Microsoft Corp (MSFT): 3.61%, Apple Inc (AAPL): 3.27%, Altria Group Inc (MO): 3.17%, AbbVie Inc (ABBV): 2.84%, International Business Machines Corp (IBM): 2.21%, McDonald's Corp (MCD): 2.01%, Intel Corp (INTC): 1.95%, Cisco Systems Inc (CSCO): 1.9%, Home Depot Inc (HD): 1.84%
Fri, Jan. 29, 2:54 AM
- IBM Chief Executive Virginia Rometty is getting a $4.5M performance bonus for 2015, despite 15 straight quarters of plummeting revenues and other ongoing financial struggles.
- Rometty's total earnings for the year won't be clear until IBM discloses the value of certain equity grants, but her bonus was $900K more than the $3.6M she earned last year.
- Her base pay for 2016 remains unchanged at $1.6M, with $13.3M in long-term incentive stock awards.
Thu, Jan. 28, 6:02 PM
- In its first purchase of an online ad creative agency, IBM is acquiring Resource/Ammirati, a Columbus-based firm declared to be "one of the top, digitally-led creative agencies in the US." Terms are once more undisclosed.
- IBM: "The acquisition of Resource/Ammirati supports IBM's goal of helping clients digitally reinvent to create transformative brand experiences. Recognized for the groundbreaking technology and analytics capabilities of Watson , IBM has over 1,000 designers working with strategists, developers and consultants to combine the power of design and technology for clients."
- Resource/Ammirati has 300+ associates and a client list that includes Sherwin Williams, Nestle, and Nationwide. The company will join IBM Interactive Experience (IBM iX), a unit containing over 10K employees and proclaimed by Big Blue to be the world's biggest global digital agency.
- IBM rival Accenture has made several digital agency acquisitions in recent years. IBM's recent digital marketing efforts have included a partnership with Facebook to help Facebook clients improve ad targeting, as well as the purchase of marketing automation software firm Silverpop.
- Recent IBM acquisitions
Tue, Jan. 26, 4:17 PM
- IBM CEO Ginny Rometty: "Mark led the highly successful transformation of his company in a competitive industry where technology has driven innovation. He is leading Ford into a future where cars are not only vehicles, but increasingly becoming mobile technology platforms. His knowledge and insights in running a complex global business will make a significant contribution to IBM."
- IBM's board bio page
Tue, Jan. 26, 12:44 PM
- International Business Machines (NYSE:IBM) declares $1.30/share quarterly dividend, in line with previous.
- Forward yield 4.23%
- Payable March 10; for shareholders of record Feb. 10; ex-div Feb. 8.
Mon, Jan. 25, 9:38 AM
- Citing higher deal risk and weakening NAND fundamentals, CLSA's Mark Heller has downgraded SanDisk (SNDK -1.6%) to Underperform, and cut his target by $16 to $70.
- Heller doesn't think weakening fundamentals will unravel Western Digital's (WDC -2.2%) pending cash/stock acquisition of SanDisk, but is worried about the potential for Tsinghua Unigroup subsidiary Unispendour to walk away from its deal to buy a 15% stake in Western for $92.50/share (107% above Western's Friday close).
- If Unisplendour was to walk away, Heller sees Western shareholders deciding on the SanDisk deal. The deal calls for Western to pay $85.10 in cash and issue 0.0176 shares for each SanDisk share provided the Unisplendour investment has closed prior to the acquisition. If it hasn't, the cash payout drops to $67.50, and the stock payout rises to 0.2387 shares. SanDisk currently trades below $67; deal closing has been forecast to occur in calendar Q3.
- Separately, Western has announced the purchase of over 100 IBM "patent assets" related to distributed storage, object storage, and non-volatile memory, as well as a cross-licensing deal with the IT giant; terms are undisclosed. Western says the purchase will augment an existing portfolio of 10K+ patents and patent applications.
- SanDisk's Q4 report arrives on Wednesday. Western's FQ2 report is due on Thursday.
International Business Machines Corp. is an information technology company, which provides integrated solutions that leverage information technology and knowledge of business processes. The company operates its business through five segments: Global Technology Services, Global Business Services,... More
Industry: Diversified Computer Systems
Country: United States
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